The case of Richard Pennell and Tri-County Apartment House Owners Association v. City of San Jose and City Council of San Jose in 1987 revolved around a rent control ordinance enacted by the city council to address housing affordability issues. The plaintiffs, Pennell and the association, argued that this ordinance violated their Fifth Amendment rights as it allowed for tenant hardship considerations when determining allowable rental increases, which they claimed was an unlawful taking without just compensation. However, the U.S Supreme Court upheld most parts of the ordinance but did not make a final ruling on whether considering tenant hardships was constitutional or not because there were no instances where landlords had been denied rent increases due to these provisions at that time. Therefore, while some aspects were deemed lawful under police power regulations aimed at promoting public welfare through affordable housing measures, others remained unresolved pending further evidence.

In the dissenting opinion for Pennell v. City of San Jose, Justice Antonin Scalia argued that the ordinance in question violated both due process and takings clauses of the Constitution. He contended that allowing a rent increase based on an individual tenant's ability to pay was not rationally related to any legitimate government interest, thus violating due process rights. Furthermore, he asserted that it constituted a taking without just compensation as it forced landlords to subsidize housing for tenants unable to afford market rates. This, according to him, amounted to a physical occupation of property which is per se unconstitutional under Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982). In his view, this case represented an unprecedented expansion of governmental power at the expense of private property rights.